July 15 – The FCA thematic on advice post-MMR

The FCA has published its long-awaited thematic report on advice and distribution, following the Mortgage Market Review (MMR).

This report is a further important milestone in the MMR journey.  It sets out with some clarity the things that the industry needs to improve upon and acknowledges areas where we have made good progress.  This document gives us more information on the FCA’s expectations that we have been trying to determine throughout the MMR.

It sets out that that it “did not identify systemic consumer detriment.”   The review found that:

  • in a majority of cases (59%) where advice was provided customers were given a suitable mortgage recommendation.
  • in only a very small number of instances (3%) was a recommendation judged to be unsuitable.

AMI’s view

AMI welcomes the FCA’s feedback, and, in particular, its commitment to work with the AMI and with individual firms to help them take the next step towards consistently delivering suitable recommendations.   We will be working with firms to reflect carefully on the review’s findings, as we continue to refine methods of working following implementation of the comprehensive rule changes in April last year.

AMI recognises that it is critical that all lenders and intermediaries focus on all the lessons to improve the total performance across the industry and ensure the best possible results for customers.

We have long advocated greater clarity in the process between Fact Finding, Advice, Making an Application, Underwriting and all the related administration activities.  Sign-posting this to advisers and consumers may improve things.  It is also clear that work needs to be done to ensure more understanding that advice is not just about the best price, but is about defining the most appropriate criteria then finding the cheapest within the agreed criteria.  Firms do need to sharpen their procedures on debt consolidation, matching products to need and producing more personalised suitability letters.   The senior management of firms also have a lot to do in improving oversight and control of the interview process.

Next steps

AMI will be working with the CML and IMLA in partnership with its member firms to fully understand this report and engineer the required changes to processes and practice.  We will also continue to ask FCA to give us clarity around their expectations.